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Apple Kills the PC Yet No One Seems to Mind

Stocks in this article: AAPL

When you go get a new computer these days you don't buy a personal computer, you get a Mac -- and with its move to cut prices Apple's (AAPL) is tightening its grip on the ailing PC market. The cheapest MacBook Air yet warns of a huge problem for other PC makers -- and there's almost nothing they can do about it. Add iPad sales, and Apple is already the world's biggest PC maker. IDC and Gartner may resist making that calculation, but Office runs on iPads now and their analytical blind spot doesn't change a thing.

Apple says it sold 4.1 million Macs in its last quarter, up 5 percent. Macs have gained share for 31 of the last 32 quarters - that's in stark contrast to the 1.7 percent decline across the wider PC market. Sure, Apple's 4.1 million remains a minority, but it doesn't sell servers and doesn't compete in budget PC sales -- or didn't...

It does now.

Cutting MacBook Air prices isn't all the company is planning -- there's talk it plans reducing iMac costs this year. MacBook Air and iMac are two of the company's most popular consumer-focused lines.

Consumers on a budget check prices, and they're beginning to get wise to the hidden costs of PC ownership: Software upgrades, application prices and malware protection are extra costs when they look at the PC, but when they look at a Mac they know they also get free system upgrades, productivity apps and little or no malware problems.

Apple's move to cut Mac prices is part of a bigger picture: when you factor in the additional cost of OS upgrades, apps and malware protection, those budget PCs aren't so cheap. Those $899 Macs compete with PC systems priced from around $650 just in terms of those costs. Compare these with existing PC alternatives in that price bracket and the Mac not only looks affordable, it actually looks better. It's a smart choice, and people love them -- look at the loyalty figures.

Millions already use iPhones (and don't really buy smartphones from anyone other than Apple and Samsung) and iPads (and Apple is likely to soon resolve its so-called "iPad problem" with new 64-bit models built to crunch through Office files) and the company already has a huge untapped market of potential Windows switchers who love the Apple product they use already.

Get wise. These price cuts mean Apple's slice of the market is going to grow at the expense of an even wider segment of the PC market.

"With MacBook Air starting at $899, there's no reason to settle for anything less than a Mac," said Apple's marketing chap, Phil Schiller. Add in those extra costs and you can slice even more of the equivalent PC purchase price.

The result?

Apple is going to dominate the PC market from around $600 and above -- and happy Apple customers means no one is going to mind.

This means if you've put your retirement fund into PC manufacturers, you'd better pull it out soon, and pump it into Apple's stock when it gets cheaper (and more popular) after its seven to one stock split next month...

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